HSBC Targets South Korea's Insurance Market

HSBC Holdings, which has just completed talks to buy Korea Exchange Bank, now plans to enter the South Korean insurance market, a day after the global banking giant bought shares in a Vietnamese insurer.

According to sources in the financial industry on Thursday, HSBC is in negotiations with Hana Financial Group to buy a 49% stake of Hana Life Insurance. An industry insider said HSBC has completed inspection of Hana Life Insurance and is poised to start price negotiations.

Hana Life Insurance, one of smallest players among South Korea's 22 life insurance companies, was established as a joint venture between Hana Bank and Allianz Group, each holding 50%. But in May, Hana Financial Group bought Allianz out and affiliated the insurance company.

South Korea's insurance sector, valued at 330 trillion won, looks set to benefit from rising demand for health-related coverage and retirement pension from the aging population.

For HSBC, a Korean insurance deal would be the latest in its acquisition spree in emerging markets. The British bank agreed to buy 51% of Korea Exchange Bank from U.S. private equity firm Lone Star for $6.3 billion. On Monday it said a unit would take a 26% stake in a life insurance venture with India's Canara Bank and Oriental Bank of Commerce. HSBC said on Thursday it bought a 10% stake in Vietnam's largest insurance firm, Bao Viet.

HSBC aims to make inroads into the Korean bancassurance market by buying a stake in Hana Life. If it succeeds in buying KEB, the British bank can launch an aggressive advance into the insurance market by using KEB’s sales network. Ironically, HSBC and Hana were at one stage in competition to buy KEB.